Tate & Lyle PLC

Tate & Lyle PLC (LON: TATE) is an FTSE 250 listed entity that is engaged in the provision of ingredients and solutions for the food, beverage, and industrial markets. 

The Company expects to announce its year ended 31 March 2022 results on 9 June 2022.

Investment Rationale – SELL at GBX 774.31

• Profit Booking: TATE’ stock price has rallied over 17% in the last six months. Therefore, investors can book profit as per their risk-return profile.
• Global Risk Concerns: British inflation hit a 30-year high of 7% in March 2022, which may cause a further interest rate hike. It can dampen economic growth and hamper corporate profits. The geopolitical tension over the war in Ukraine has given rise to raw materials cost and inflation. This can have an impact on the company’s operations.
• Overvalued Multiples: On a forward 12-month basis, key trading multiples (EV/Sales, EV/EBITDA, Price/Earnings, Price/Cash Flow, and Price/Book) are quite overvalued against the median of the Consumer Non-Cyclicals sector.
• Technical Indicator: The momentum oscillator 14-day RSI (63.10) is in the overbought zone, while the price has breached the upper Bollinger Band. Thus, the price can face retracement from the current levels.  

Recent News

Special Dividend and Share Consolidation: On 7 April 2022, TATE completed the disposal of a controlling stake in Primient to KPS Capital Partners. It also unveiled intentions to return around £500 million to Ordinary Shareholders through a proposed Special Dividend per share of £1.07, expected to be paid on 16 May 2022.

One Year Share Price Chart

 (Source: Refinitiv, Analysis conducted by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23) (Illustrative)

*Peers: Wynnstay Group PLC, Unilever PLC, Greencore Group PLC, and Cranswick PLC.

*All peers are LSE-listed Companies from the Industrials sector.  

Conclusion

Based on the attractive notional gains in the short-term, macroeconomic instabilities, bearish technical indicators, coupled with the unfavorable Valuation conducted above, we have given a "SELL" recommendation on Tate & Lyle PLC at the current market price of GBX 774.31 (as of 27 April 2022, at 8:05 AM GMT+1). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

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